Sometimes, no matter how we meticulously plan our budget, it’s always difficult to keep up with the daily expenses. Even those who have been religious in keeping their monthly budgets have been having a hard time keeping up. There will always be an unexpected bill that needs to be paid. And oftentimes, we need to purchase an item which we can’t pay in lump sum upfront. Talk about your phone breaking, or the announcement of online schooling, or work being done at home. You will always have a need for something you may not afford outright. Sometimes, the smarter decision is to pay in tranches, rather than paying in one go. It will help with the family cash flow.

Before making that decision to purchase, here are the things you need to consider in availing Installment versus paying in Cash.

Advantages in Paying in Installment:

1. Installment Plans are Convenient

Technology has made it super easy and super fast to avail of an installment plan. Most financing companies are now equipped with a proprietary AI (Artificial Intelligence) technology, which allows for an application to get approved within minutes to up to 24 hours. Gone are the days when it takes a few days to weeks for the processing of the CI (Credit Investigation), before an application gets approved. Requirements are made simpler. Some companies just require 1 valid ID, while some ask for the proof of billing and proof of income. Only those of legal age are allowed to apply as well.

Nowadays, you can apply for a loan even without a credit card. No need for a collateral and co-maker as well.

2. Small Installments are easy to manage.

If you have a stable income, it will be easier to manage your finances by allotting a small portion for repayments on a monthly basis. Paying back will not burn a hole in the borrowers’ pocket. One must be responsible and disciplined enough to settle repayments on a regular basis to avoid penalties and interests.

3. Managed cash flows.

If you have a productive use for money, it is better to pay in installments. You might want to use some of your cash to put up a business, put in stocks or investments, etc.

Disadvantages in Paying in Installment:

1. Installment Payments come with interest rates.

Before applying for a loan, know the interest right prior to committing. Know the associated penalties also, should you fail to pay on time. Know that if you fail to pay your monthly dues, there will be certain repurcussions which would let your loan amount balloon over time.

2. Repayment time can be a bit short

Most online financing companies only offer short loan durations – anything from 30 to 90 days. Because your installment plan is not “secure” (meaning no collateral, credit card, or co-maker), lending companies can only allow you a short time to complete your repayments.

3. Application for a Loan is always subject for approval.

It’s not automatic that when you apply for a loan, you will always get approved. It is subject for approval and has different factors involved. If you are able to maintain a good credit standing, trust that you can always be approved for a higher credit limit.

Advantages in Paying in Cash

1. Paying in Cash is cheaper than paying in installments.

If you can save up money from your Christmas Bonus to buy that new phone, then do so. Paying in cash usually comes with a lot of perks such as freebies and discounts.

2. It is better to pay a lump sum amount for depreciating assets.

For example, it is better to buy furniture by paying a lump sum amount especially on items that easily depreciates in value. You do not want to pay interest on a loan to buy it and make it more expensive.

Disadvantages in Paying in Cash

1. No Extra money for Emergency expenses

If you are buying a big-ticket item like gadgets, you should not dip into your emergency fund.  It is not a great idea to pay in cash and end up not having enough for your future expenses. As a rule of thumb, always have an emergency fund that is equal to 3-6 months of expenses.

Choosing which payment method to take requires planning and discussion with family members. Regardless what you opt to choose, iRent Mo offers different payment options such as Cash on Delivery and Installment through our partners, Tendopay and Billease.

IRent Mo offers installment payment schemes to allow you to make smart and educated purchases so you can get the best value for your hard-earned money.


The Frugal Farmer